UGI - Earnings call transcript Q3 2019

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Operator

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the UGI Corporation AmeriGas Third Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions] Thank you.

Alanna Zahora, you may begin your conference.

Alanna Zahora

Denise. Thanks, and joining everyone you thank morning, us. for Good UGI. Jastrzebski, UGI of Corporation; me CEO Propane; today Gallagher, of Ted are of and President CEO With Hugh CFO President John Walsh, and AmeriGas and

our today predict. Before we begin, today's release be Form forward-looking and me earnings because remind date to that Please only. which believes difficult as may uncertainties that include differ extensive of annual our management significantly could our you statements, reasonable report certain for that results. XX-K let read list comments to of Actual factors are of and results affect risks on an

describe to circumstances are certain non-GAAP our We duty update presentation. assume these or revise financial measures. reflect that Reconciliations forward-looking no to measures from statements GAAP of of the different comparable appendix our events also business to are measures available using or We'll the in expectations.

the turn John. call to me let Now over

John Walsh

that call. morning, Good reporting results Alanna. Thanks AmeriGas. our for press UGI to third hope and had releases quarter and to our the opportunity review I you've welcome all

third heating Our a is us, period season. the beyond quarter since we're for typically winter quiet

and visibility but quarter for future provide for made third portfolio our of our two significant that been for cash opportunities been quiet. will announced ensure anything generation, fiscal investment time we strategies, the foreseeable 'XX an on exciting However, growth that the It's we've are has investments as large future. have company, in a and with core progress flow balanced aligned and

transactions. the in to AmeriGas Midstream Columbia color later more call on the back come I'll and provide

milestones the businesses. across performance do that, I I'd Before our our to review achieved in and QX major like

QX. and solid QX on our we of the continued delivered very businesses. region the overall in Marcellus a in the demonstrate the Europe, impact our QX normal portfolio in business, capacity overhang of weather limited of volatility performance of in results weather Our warmer than Despite resiliency management

On the the who call, financial market turn wrap on AmeriGas AmeriGas an I'll Midstream developments in an to today's activities Columbia provide review Hugh performance. Ted, overview transaction. for UGI's key QX will with I'll and with then up over quarter, I'll and update and you comment will on it of

Our negative adjusted QX well also our Net our EPS $X.XX QX fiscal was of and GAAP was EPS, fiscal QX EPS $X.XX. our $X.XX QX EPS EPS and 'XX was adjusted adjusted $X.XX. adjusted 'XX above above

the mark-to-market These for unsettled valuation hedges. quarters have been adjusted of

full be guidance. comments. end the on We year to our detail expect to $X.XX outlook more Ted will at in provide EPS low our our his $X.XX of

While the big news in to number the additional developments. of transactions, the AmeriGas were a Columbia noteworthy quarter related and there

July filed team utilities rate with settlement our combined PUC utilities in for petition Our the Pennsylvania a joint case. late gas

combined LDCs. us, a we're that for gas rate merged settlement first is major million early our the represents reflects step rule the The will this This the this increase fall. settlement a and hopeful on in Commission $XX as for case rate

system by commitment. take-or-pay This will million Auburn by dekatherms day XX%, is and capacity UGI Auburn XXX,XXX nearing Services will completion underwritten come expansion our a Energy $XX on by of about project, November on IV a XX-year or which expand stream project. X the is

new well has projects. to Services active gathering also Marshlands our and infrastructure, adding Texas been Energy system developments in support Creek pad on

current our gathering new prices. see systems despite the to commodity continue with on system low projects the We Marcellus, the in producers

we range areas we've marketing. practices, are best positive and executed results propane UGI a programs adopting to impact ensure of of International, where most leverage uniformly as The across were businesses, see the increasing We and sourcing, that of in initiatives, evident began scale such in our our efficiency businesses. that distribution

PennEast the on to permitting good very pipeline continue the local for process make project. progress We

Pennsylvania, in is with review. As Pennsylvanian a is performing are now reminder, complete, has in applications that its the the New permit administratively Jersey. DEP and our The balance two-thirds technical determined of pipeline

New making We're as in progress good well. Jersey

of All the been conducted. required field had surveys

We next The all track construction, received. on for necessary remains the permits approvals have week. be New to commence expect within project Jersey filing to been once our

In addition customers proposed settlement, our infrastructure team our executing the to and system reaching on continue focus replacement adding rate program. to utilities long-term new case across our

capital year-to-date heating and replacement of reinforcement, a replacement to and continuing XX,XXX invest almost XX,XXX. added levels We're on exceed full We've expect we new emphasis year with record primary and bare residential commercial on cast steel. additions and customers of to our infrastructure iron

'XX base be for almost $XXX This in in rate our us. for capital of record million was will included case recent spend capital another forecast rate fiscal The the settlement.

status in I'll like of the but for review. over Columbia to the to I'd financial at call this later transactions, Ted? AmeriGas the turn point on to Ted comment the it and return

Ted Jastrzebski

Thanks John.

quarter results given the solid, As weather this were particularly shoulder John April. mentioned, the significantly month of warmer in

April third quarters, impacted two for XX% as quarter, in the is the the very negatively the degree quarter in isn't weather the weather warm impactful of Although it in accounts days heating and volumes. approximately as first

we've our earnings of quarter the XXXX. for third GAAP fiscal On the third out from share laid of fiscal adjustments this compared quarter XXXX, per slide, adjusted earnings to to

of impact loss As last instruments, gain a hedging earnings in this mark-to-market you a year. versus our changes of can the see, $X.XX adjusted $X.XX year of exclude commodity

and to of adjustable to approximately on instruments XXX,XXX is EPS currency merger, booked the foreign AmeriGas derivative our the unrealized impact had expenses negligible. We of but $XXX,XXX losses related

increased per XXXX. share earnings of Adjusted QX versus $X.XX

XXXX. than was XX% AmeriGas a year, QX businesses, that $X.XX result largely of last LPG of versus to due our lower volumes was For weather down warmer April

margin great Our a weather to back to despite year-to-date, expense dating International done job has largely last team unseasonably due management. business summer. warm The $X.XX and increased year-over-year,

impact reduction Marketing the negative of the versus prior $X.XX to lower increased from electric capacity year with total adjusted margin. last EPS lower Adjusted period. management there million $XX.X increased our TCJA At the as was the earnings year, revenue due natural Midstream generation $X.XX and businesses. versus at last primarily gas declined $X.XX Utility, year, and to associated

but normal businesses. last the Turning in weather to EBITDA the $XX.X year. of now AmeriGas year $XX.X reported the versus adjusted million warmer individual than X.X% experienced period. million quarter, in prior AmeriGas

in by last expenses which April, year. than the X.X% the most and relating operating reserves down impacted accounting on to were significant month for litigation, Volume was was of the quarter weather, a error prior XX% is years. warmer an warmer and correction

approach AmeriGas in of million. more continues management these the $XXX are optimize down light to expense detail a guidance discuss Hugh and minutes. identify in a to $XXX operational to opportunities In results adjustments, team taking AmeriGas we The disciplined will maintains to million efficiencies. few

million. taxes before $XX.X income adjusted reported International UGI of

impact of this quarter Weather normal, slide. quarter of the on was reminder, since translation normal XX.X% colder effects the than for the a than quarter XXXX. colder results weather, second As the first

the slightly to year with were due and the margin this to management the period, Volumes local energy of currency, pricing versus costs competitive In lower in increased associated due East. conservation. total prior quarter, recovery the margin

expenses team Our operating and and weren't XXXX, focused on year. expense prior QX of that QX the the U.K., flat the keeping acquisitions effects versus incremental included QX administrative management, despite in in and of Belgium, Netherlands

lower year, Total Hunlock lower reflecting generation expenses. largely taxes and and weather Midstream income was that and Operating electric our than before compensation, expenses reflecting consulting million volumes legal management $X.X normal, margin, on reported of warmer margin $X.X from versus million. decreased last facility. capacity XX.X% lower Marketing decreased

of UGI When ratepayers that the at important the quarter things, the to results, among Utilities PUC the tax income other from TCJA. XXXX Pennsylvania third May $X.X reported looking impact to million. credit XXXX of the comparative reflects taxes from it's before addressing XX, remember order savings

million. $XX.X As revenues reduced result, a in quarter by were the

of lower total weather. Excluding the April core volumes the margin decreased impact million, due $X from revenue reduction, market warmer to

due uncollectible Depreciation lower and Operating increased investments. consulting and maintenance allottable administrative corporate capital increased system IT, and $X.X and to decreased lower last expenses versus expenses. from million IT accounts, distribution lower year,

want I Before EPS. The fourth over and I for on we adjusted acquisition to on to it expectations our it be CMG quarter. turn neutral X, to comment to August closed expect Hugh,

to AmeriGas negative late within We in the to have $X.XX August close expect a and transaction the range. impact EPS

heating the As business days degree lack the quarter. to usually fiscal AmeriGas has a due fourth earnings negative reminder, of in the

UGI realize and compliance in discussed quarter increased in the fourth International, previous offset we energy As to benefits margins costs at margin conservation beyond. to the these expect and quarter, the

operational positioned to well X.XX. we come focus our During OpEx our quarter, improve remains in end on range to $X.XX and to shareholders, value expect to incrementally to of our UGI and deliver efficiency low at management of the grow guidance quarter results. fourth expects our the and historical

increase UGI will dividend quarterly be merger in is dividend with $XX.XX share payable transaction, and completing AmeriGas per the the that was XX% Finally the now October. announced

AmeriGas. for Hugh? I'll now turn and over remarks report my concludes his on to That Hugh it

Hugh Gallagher

Thanks Ted.

XX% period. averaging degree year, were retail X.X% X% the Nationwide of volumes result a during warmer Largely April weather, last April quarter as XXXX. warmer of the versus with than than prior year April declined the days

prior quarter compared the of for quarter accounting year. lease vehicle the to approximately Adjusted reserve to related million was the million, period prior the that million in error EBITDA expense. current And impact worth $XX unusual and includes our earlier, an as noting, EBITDA adjusted stated related it's in the items adjustments, to correction $XX.X for $XX.X of

our year. for million guidance $XXX our as adjusting this $XXX results EBITDA we million are Given of quarter, for the to earlier, to mentioned

year's program volume up up the despite quarter, volume growth quarter, warmer National Cylinder experienced last with program AmeriGas our Our solid Exchange in from the Accounts and was weather. slightly X.X%

call, the last delivery On that home of the - market pleased progress in in development we we home Philadelphia program, announce delivery in our launched which concept. cylinder discussed that's June. C-Y-N-C-H, call I'm we quarter's Cynch, that the the to

phase of to very expansion Customer been offering to continue at short just discussion of response near pleased other to a have the plan in execution into such in launch future. was this in so we program very time. a we're program has This time cities the this go concept from the period encouraging, year, this like to last and

plans several rollouts these Also locations, in Exchange hundred are additional a large with underway. during convenience quarter, retailer result AmeriGas vending will of XX/X our machines rollout that Cylinder chain, a team automated and major expansion the store completed the already and of cylinder

declared good related in the registration We securities continue XX. transaction to to July with was progress SX make UGI. merger on issued effective statement to with on conjunction the The be

we look is process thereafter. shortly is preparing we August solicitation for forward closing, to of the XX, pending for are and proxy Our transaction meeting, the unitholder which a and approval scheduled currently underway,

transaction, on leveraging work in fourth to experience, initiatives quarter. scale, to fiscal efficiencies the and closing related significant we focused towards improvements our operating in our progress significant expect our remain our drive and during make of As way we the technology we to these customer

in period employees, our their continued as want XX-year our for in roles the navigate I closing, through this to on to important both company, our commitment support and In AmeriGas' thank and lines front customers history. we

I'll turn that, John over With to remarks. his John? closing for the call

John Walsh

Thanks Hugh.

I earlier As in was quarter QX for mentioned my remarks, particularly us. noteworthy a

last With closing the AmeriGas Columbia growth. enhanced transaction long-term pending for the platform transaction the of significantly our we've week, cash flow and and earnings Midstream

we're expands our the our the Midstream, expanded of of reach over In broadening area producer relationships in business critical case and rapidly significantly the midstream resources scale past that an Columbia of Columbia our adds has increasing network. the and decade.

a we're that With acquiring know company the well. AmeriGas we transaction,

Both cases, we we're developments engine long-term proceeded past of flow enhancing as the over UGI cash success. and critical cash with both expected weeks. been fueling transactions a the has critical that In of element few the organic our have

UGI. Midstream August transaction team all We're Columbia the Midstream X. Columbia closed joined The pleased on members have that of

I As on about in the on the expansion our acquired. systems five the month projects we excited deal, call to noted opportunity invest last announcing we're

the Appalachia five years. three We on Western of a expect next $XXX million core in to to over projects systems these to invest million series $XXX

these infrastructure expect by with take-or-pay to be We investments to over past investments approach decade. contracts, midstream consistent the long-term supported our

to key Our term of systems, detailed the for is welcoming and each on customers and team future on Columbia focus producers in Midstream roadmap our executing the the investments. the Columbia short meeting UGI,

The AmeriGas UGI process unitholders the has proposal also underway. the received voting transaction process as have and notice All of proceeded is schedule. on you noted,

to XX, vote. confirm the have outcome of scheduled the unitholder the meeting August We on

a looking AmeriGas with a provide 'XX significantly will to We're foundation enhance the and UGI wholly-owned broader fiscal this transaction in starting and forward for concluding funding free QX our process cash entity. company. as This flow

entire operational businesses natural corporation. enhanced our next will future over M&A in This investments the be cash and major for drive the capital to LPG investments technology gas flow our in businesses, decade, improvements used across

We're excited the UGI's drive flow. to engine about growth this this enhanced major cash growth to future and enhancement opportunity free with for cash

broader these focused As natural we to by propane provided and look range across transactions the our gas by the opportunities and 'XX businesses. beyond, of and attractive forward two opportunities fiscal we're major on investment

to with business great execute unit growth ability of that the align strategies. teams confidence our investments and operationally We attractive in identify have our

will call With the it over that, open will for I turn who up Denise, back to your questions.

Operator

question first comes of Coleman with Your Instructions] America. Dennis Bank [Operator from

open. Your line is

Unidentified Analyst

This Alex on is for Dennis.

quick for Just me. couple of a questions

For expense, that? the guys provide could accounting you error any the detail litigation on and more

Ted Jastrzebski

error were we accounting is approach the getting earlier the little to were how starting we a where we our vehicles, use the So than on the depreciation. we related lease vehicles

to clawback had we So accounting. that

On the litigation, can is I nothing that there add. more

Unidentified Analyst

that Thank on on weather you little then, UGI weather International for segment. weather you. know impacts the the said provide And call or quarter? the the Could the is any John, that throughout the that, I color of additional warmer segment beginning guys a you in

John Walsh

coming the the out given winter. - a It's Sure. of calendar,

for it's shoulder So us. quarter a

business, beginning particularly winter, of the warmer on have heating their is next systems a shutdown tank to as April residential the particularly if important is the people example, a because, for out you kind on in weather April, defer and a of any strong propane the propane season. tendency you until heating winter for of come fill, side So there of and

warm So leading of this into season. shoulder QX, a we came relatively out

carryover demand. that what's is So reflected in

both that, said operating quarter, the at the the underlying really of had Although when around having look expense international business, a business performance management. and management margin strong you

Operator

Jefferies. from Sighinolfi Your Chris next question comes with

Your line is open.

Chris Sighinolfi

- John back PennEast. circle to I just want on

of New anticipating and of Jersey project PennEast, But online the are and by year-end I that permit calendar think in prepared Jersey XXXX did have made for previously you noted one the Pennsylvania end your CapEx next I from think - both Resources, and noted expectation you've the by in construction I project year and next year-end they had see partners, kick year. commence New the you an remarks, did progress on XXXX. to that process

in-service we curious service just I'm might and that start to when for in what we when terms stand and So we where milestones your project watch might of therefore, and see expected be? construction should the

John Walsh

I think just the Yes, duration the the Chris, permitting of key, becomes process.

timing difficult decision terms obviously it's in our not it's that and process. of So of

Pennsylvania then open - which for and relevant executing development of will New of the Jersey, So crucial, will permits, both processes would the - and the that move enable we critical they be be milestones begin most us certainly the those as will execution, along, be issuance in up and to project. the would it

there then actually for when are And windows can you execute.

start looking winter construction not are to major you typically So - at not being able until the is to being activities, start over. able

preliminary You can do some construction type work.

then the begin where of permits, looking the getting when significant permit and relevant of can process, issued, we then we driver so and really the the permits the the key field calendar issuance is, are to kind But, execute at in work. concluding

Chris Sighinolfi

Okay.

John Walsh

speculate don't based the that an a at, of potential update in The can to are want is update permits, New then, then before we the an which end to - on year last Jersey I for you're referencing, certainly you since on, beyond accurate timing agencies apply that, issuance of and is if its you and you looking timeframe construction. start Pennsylvania various next think

Chris Sighinolfi

the - for in-service next this point? wouldn't that you Beyond - you this end fiscal okay, until of mean begin year, or mean construction do an

John Walsh

activities point. begin that Construction wouldn't until

Chris Sighinolfi

'XX, of - project then year? the it that that completed presume say, to be is assume safe that you can we could let's spring if within start, And you will

John Walsh

Yes.

construction that and 'XX, sort to construction we within commencing actually would you So all you executing of in pre-construction you would of the all be spring a wouldn't if having a year. timeframe - conclude of just Definitely. assume, pick other in position that permits, activity,

Chris Sighinolfi

corporate could both CME you've business in at going announced want, terms just just are, a where X-Ks obviously deal, and corporate the the know and Can of put you us If Ted, credit Energy what loan, from us financing we the and presentations gears you related loan Services to either in offerings. of remind series and AmeriGas we bondholder processes deal. what the - switch term facility terming And I level? debt some we're when you seen your out - banks obviously to wanted got one bridge then you you in and of I went the to remind of potentially Can you where do, or have level both just

Ted Jastrzebski

Yes.

using So facility - facility asset we that We did the bridge end up using up not did a did close we end for not deal. the that have established to CMG assets. that we

We are plans corporate fully at level. financed against our the

of process is a million raised that we in the funds We've are revolver million and and million, in raising million in facility, $XXX term $XXX the loans, at $XXX $XXX of for B that to on Services Thursday a financing debut a that's be closing loan it Services, week. secured, Energy and early it's level, expect term for next we pricing and in Energy

Chris Sighinolfi

the the to sweep the revolver is and some loan. level, the for - cash excess for expectation out or term either go then repayment the of there, down corporate to And us? AmeriGas at expectation then safe to UGI short-term still borrowings for debt level that towards go Is a any towards still of clearing paying at

Ted Jastrzebski

of expectation, visibility billion get AmeriGas, That's debt today safe with still $X.XX multiple closer inflow to years. the the over where with to do the we bring the over want cash have the feasible towards very are and in couple future $X at bring a what down we of time, We AmeriGas. buying and level that's billion to the and that given we next

talked having the able we the compelling for like be to level past, in we've finance as to about availability opportunities. corporate then, at strategic And ourselves

corporate at level things debt come that see to want would we down, time, over equal. so all And

John Walsh

the AmeriGas dividend with here, transactions, transaction the sharing cash of enhanced that announced announcement, the in the with investors quick particularly we're We're also dividend we to these one increases payments. just the our we've to made of add Chris. form And some to associated

Operator

Christine Barclays. Instructions] Cho [Operator Your from question next comes with

is open. Your line

Christine Cho

color impact have this the APU just give on us forma make quarter. impact APU if I we AmeriGas an what modeling pro idea, new to on terms right? deal - the UGI the we're correctly, So the of of want close in from XQ been would appreciate that the have combination it is Can you UGI. to sure were just

Ted Jastrzebski

range, say understand within timing the $X.XX there to that, remarks and close expect So and to would we an we range. $X.XX to I the back to August, EPS to impact been with guess excluded which the doing I'd that completely sure be the not and about at a $X.XX AmeriGas we've guidance that, expect question. I'm late be the on go deals in depending I my that incremental for continues is and offering, to the deal

Christine Cho

was second guess if time had would if closed for impact hypothetically I the the asking the I quarter? been just like fine? results, quarter don't that's it, you have deal for But what in the

Ted Jastrzebski

period. just not for I'd answer hypothetical well to a assume Yes, a previous

John Walsh

We don't that of in have calculation us. front

Operator

call And over for Walsh remarks. to closing I turn the John back will

John Walsh

much. look this we'll fiscal attention Okay, care. Denise. on forward to morning time call. results outlook for QX and all 'XX next and very you your you and the Thank our you Thank for Take discussing our with

Operator

conference This concludes today's call.

now may disconnect. You

UGI (UGI) 6 Aug 192019 Q3 Earnings call transcript